Steve Rubel ruins the party for online ad-supported software in 2006 Trends to Watch Part V: Crash 2.0:
The startups, however, aren’t the only ones who are enthusiastic about free ad-supported Web apps. Take Microsoft. In November Microsoft unveiled Windows Live and Office Live. Both of these too will be primarily supported by advertising. They are designed to complement, rather than replace their desktop brethren. At the time Bill Gates said: “This advertising model has emerged as a very important thing.” That certainly made people stand up and take notice.
Unfortunately, the reality is that for all of the hype this year around online advertising, it is not growing as quickly as the Web 2.0 market hopes. In fact, just last week Jupiter Research projected that online display and search advertising spending will grow at an average annual rate of 10% between 2005 and 2010. This spells trouble for startups hoping to capitalize on online advertising. There won’t be enough to go around – at least right now. Their window is closing.
He thinks the big players like Google, Yahoo, and Microsoft will be able to do OK, but it’s a useful reminder that despite the recovery from the dotcom bust and the decline of traditional media, there isn’t an unlimited pool of advertising dollars going begging for publishers.